Two Harbors Investment Corp. Announces 2023 Dividend Tax Information

Rhea-AI Summary

Two Harbors Investment Corp. (TWO) announced the tax treatment of the company’s common stock and preferred stock dividends declared in 2023. Stockholders should review their tax statements and consult with their tax advisors. The company reported no portion of its 2023 dividends as excess inclusion income and provided detailed information on the tax treatment of common and preferred distributions for 2023 and 2024.

Tax Advisor

The announcement by Two Harbors Investment Corp. regarding the tax treatment of dividends is significant for shareholders from a tax planning and compliance perspective. It is essential for investors to understand the composition of dividends received, as this affects the tax rate applied to each dividend type. Ordinary dividends are taxed at the individual's income tax rate, while qualified dividends may benefit from lower capital gains tax rates. The absence of excess inclusion income, which could be subject to unrelated business taxable income (UBTI), is favorable for tax-exempt investors such as retirement funds, as it simplifies their tax reporting and potentially reduces tax liabilities.

Furthermore, the Section 199A Dividends are noteworthy because they may be eligible for the 20% qualified business income deduction, providing an additional tax advantage to certain shareholders. The detailed breakdown of dividend distributions facilitates accurate tax reporting and allows shareholders to optimize their tax positions. The company's proactive disclosure emphasizes transparency and aids in maintaining shareholder confidence, especially when it comes to understanding the tax implications of their investment.

Financial Analyst

From a financial analysis standpoint, the dividend declaration by Two Harbors Investment Corp. reflects the company's performance and its ability to generate and distribute income to shareholders. The distribution amounts and types, such as ordinary and qualified dividends, can offer insights into the company's earnings quality and capital allocation strategy. Notably, the portion of dividends classified as nondividend distributions may indicate a return of capital, which could imply that part of the distribution is not from current or accumulated earnings but rather from the shareholders' original investment.

This has implications for the company's valuation, as return of capital can reduce the cost basis of the investment, potentially affecting capital gains calculations upon sale of the stock. The consistency and sustainability of dividend payments are also key indicators of financial health for income-focused investors. By analyzing the dividend trends and comparing them with industry peers, investors can gauge the company's competitive position and future income potential.

Market Research Analyst

Two Harbors Investment Corp.'s focus on residential mortgage-backed securities, mortgage servicing rights and other financial assets places it within a sector sensitive to interest rate fluctuations and housing market dynamics. The dividend declarations and tax treatments are reflective of the broader economic environment and regulatory framework in which the company operates. Investors and market analysts can assess the attractiveness of the REIT sector by examining dividend yields in relation to risk, the performance of the housing market and interest rate trends.

Understanding the tax implications of REIT dividends is crucial for evaluating the net after-tax return on investment. As such, the company's announcement serves as a data point for comparing the fiscal efficiency of investing in REITs versus other asset classes. It also provides a basis for forecasting future distributions, which are integral to total return calculations and investment decision-making within the real estate investment sector.

NEW YORK--(BUSINESS WIRE)-- Two Harbors Investment Corp. (NYSE: TWO), an MSR + Agency RMBS real estate investment trust, announced today the tax treatment of the company’s common stock and preferred stock dividends declared in 2023. This information is provided to assist stockholders with tax reporting requirements related to dividend distribution of taxable income by Two Harbors. Stockholders should review the 2023 tax statements received from their brokerage firms or other institutions to ensure that the statements agree with the information provided below. Additionally, as each stockholder’s tax situation may be different, stockholders are encouraged to consult with their own professional tax advisor with respect to their individual tax consequences.

Tax Treatment of the Common and Preferred Distributions

Two Harbors is required to report the portion of its 2023 dividends that are treated as excess inclusion income for federal income tax purposes. No portion of the company’s 2023 dividend distributions are expected to consist of excess inclusion income, which may be treated as unrelated business taxable income (UBTI) and subject to special tax reporting for certain tax-exempt investors.

The company declared dividends with respect to its common stock and Series A, Series B and Series C preferred shares on December 19, 2022. The record date for the company’s common stock distribution was January 5, 2023, and the record date for the company’s Series A, Series B and Series C preferred distributions was January 12, 2023. Accordingly, these common and preferred distributions were treated as 2023 distributions for tax purposes and reported on the 2023 Form 1099-DIV. In addition, the company declared dividends with respect to its common stock and Series A, Series B and Series C preferred shares on December 18, 2023, with a record date of January 12, 2024. Accordingly, these common and preferred distributions will be treated as 2024 distributions for tax purposes and reported on the 2024 Form 1099-DIV.

Distributions for Two Harbors Investment Corp.

The federal income tax classification of the Two Harbors’ 2023 common and preferred stock distributions as it is expected to be reported on Form 1099-DIV is set forth in the following tables.

2023 FORM 1099-DIV – Common Stock						Box 1a Total	Box 1b Total	Box 2a Total	Box 3 Total	Box 5 Total
Distribution Type	Declaration Date	Record Date	Payable Date	2023 Total Distribution Per Share	Adjustments	2023 Ordinary Dividends	2023 Qualified Dividends(1)	2023 Capital Gain Distributions	2023 Nondividend Distributions	Section 199A Dividends(2)
Cash	12/19/2022	1/5/2023	1/27/2023	$0.600000	$0.000000	$0.600000	$0.158958	$0.000000	$0.000000	$0.441042
Cash	3/23/2023	4/4/2023	4/28/2023	$0.600000	$0.000000	$0.600000	$0.158958	$0.000000	$0.000000	$0.441042
Cash	6/21/2023	7/5/2023	7/28/2023	$0.450000	$0.000000	$0.450000	$0.119218	$0.000000	$0.000000	$0.330782
Cash	9/19/2023	10/3/2023	10/27/2023	$0.450000	$0.000000	$0.450000	$0.119218	$0.000000	$0.000000	$0.330782
Totals				$2.100000	$0.000000	$2.100000	$0.556352	$0.000000	$0.000000	$1.543648
(1) - Qualified Dividends shows the portion of the amount in Box 1a that may be eligible for capital gains tax rates
(2) - Section 199A Dividends shows the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under Section 199A
2023 FORM 1099-DIV – Preferred Series A						Box 1a Total	Box 1b Total	Box 2a Total	Box 3 Total	Box 5 Total
Distribution Type	Declaration Date	Record Date	Payable Date	2023 Total Distribution Per Share	Adjustments	2023 Ordinary Dividends	2023 Qualified Dividends(1)	2023 Capital Gain Distributions	2023 Nondividend Distributions	Section 199A Dividends(2)
Cash	12/19/2022	1/12/2023	1/27/2023	$0.507810	$0.000000	$0.507810	$0.134534	$0.000000	$0.000000	$0.373276
Cash	3/23/2023	4/12/2023	4/27/2023	$0.507810	$0.000000	$0.507810	$0.134534	$0.000000	$0.000000	$0.373276
Cash	6/21/2023	7/12/2023	7/27/2023	$0.507810	$0.000000	$0.507810	$0.134534	$0.000000	$0.000000	$0.373276
Cash	9/19/2023	10/12/2023	10/27/2023	$0.507810	$0.000000	$0.507810	$0.134534	$0.000000	$0.000000	$0.373276
Totals				$2.031240	$0.000000	$2.031240	$0.538136	$0.000000	$0.000000	$1.493104
(1) - Qualified Dividends shows the portion of the amount in Box 1a that may be eligible for capital gains tax rates
(2) - Section 199A Dividends shows the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under Section 199A
2023 FORM 1099-DIV – Preferred Series B						Box 1a Total	Box 1b Total	Box 2a Total	Box 3 Total	Box 5 Total
Distribution Type	Declaration Date	Record Date	Payable Date	2023 Total Distribution Per Share	Adjustments	2023 Ordinary Dividends	2023 Qualified Dividends(1)	2023 Capital Gain Distributions	2023 Nondividend Distributions	Section 199A Dividends(2)
Cash	12/19/2022	1/12/2023	1/27/2023	$0.476560	$0.000000	$0.476560	$0.126255	$0.000000	$0.000000	$0.350305
Cash	3/23/2023	4/12/2023	4/27/2023	$0.476560	$0.000000	$0.476560	$0.126255	$0.000000	$0.000000	$0.350305
Cash	6/21/2023	7/12/2023	7/27/2023	$0.476560	$0.000000	$0.476560	$0.126255	$0.000000	$0.000000	$0.350305
Cash	9/19/2023	10/12/2023	10/27/2023	$0.476560	$0.000000	$0.476560	$0.126255	$0.000000	$0.000000	$0.350305
Totals				$1.906240	$0.000000	$1.906240	$0.505020	$0.000000	$0.000000	$1.401220
(1) - Qualified Dividends shows the portion of the amount in Box 1a that may be eligible for capital gains tax rates
(2) - Section 199A Dividends shows the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under Section 199A
2023 FORM 1099-DIV – Preferred Series C						Box 1a Total	Box 1b Total	Box 2a Total	Box 3 Total	Box 5 Total
Distribution Type	Declaration Date	Record Date	Payable Date	2023 Total Distribution Per Share	Adjustments	2023 Ordinary Dividends	2023 Qualified Dividends(1)	2023 Capital Gain Distributions	2023 Nondividend Distributions	Section 199A Dividends(2)
Cash	12/19/2022	1/12/2023	1/27/2023	$0.453130	$0.000000	$0.453130	$0.120047	$0.000000	$0.000000	$0.333083
Cash	3/23/2023	4/12/2023	4/27/2023	$0.453130	$0.000000	$0.453130	$0.120047	$0.000000	$0.000000	$0.333083
Cash	6/21/2023	7/12/2023	7/27/2023	$0.453130	$0.000000	$0.453130	$0.120047	$0.000000	$0.000000	$0.333083
Cash	9/19/2023	10/12/2023	10/27/2023	$0.453130	$0.000000	$0.453130	$0.120047	$0.000000	$0.000000	$0.333083
Totals				$1.812520	$0.000000	$1.812520	$0.480188	$0.000000	$0.000000	$1.332332
(1) - Qualified Dividends shows the portion of the amount in Box 1a that may be eligible for capital gains tax rates
(2) - Section 199A Dividends shows the portion of the amount in Box 1a that may be eligible for the 20% qualified business income deduction under Section 199A

Consult Your Tax Advisor

Stockholders may have additional reporting obligations to the Internal Revenue Service and/or other tax authorities.

The U.S. federal income tax treatment of holding Two Harbors common and preferred stock to any particular stockholder will depend on the stockholder’s particular tax circumstances. You are urged to consult your tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences to you, in light of your particular investment or tax circumstances, of acquiring, holding and disposing of Two Harbors common and preferred stock.

Two Harbors does not provide tax, accounting or legal advice. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S., federal, state or local tax penalties. Please consult your advisor as to any tax, accounting or legal statements made herein.

Two Harbors Investment Corp.

Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, mortgage servicing rights and other financial assets. Two Harbors is headquartered in St. Louis Park, MN.

Additional Information

Stockholders of Two Harbors and other interested persons may find additional information regarding the company at www.twoharborsinvestment.com, at the Securities and Exchange Commission’s Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., 1601 Utica Avenue South, Suite 900, St. Louis Park, MN, 55416, telephone (612) 453-4100.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240124741465/en/

Margaret Karr, Head of Investor Relations, Two Harbors Investment Corp., (612) 453-4080, Margaret.Karr@twoharborsinvestment.com.

Source: Two Harbors Investment Corp.

What is the ticker symbol for Two Harbors Investment Corp.?

The ticker symbol for Two Harbors Investment Corp. is TWO.

What did Two Harbors Investment Corp. announce regarding stock dividends?

Two Harbors Investment Corp. announced the tax treatment of the company’s common stock and preferred stock dividends declared in 2023.

What should stockholders do regarding their tax reporting requirements?

Stockholders should review the 2023 tax statements received from their brokerage firms or other institutions and consult with their own professional tax advisor.

What did Two Harbors Investment Corp. report regarding the portion of its 2023 dividends?

Two Harbors Investment Corp. reported that no portion of its 2023 dividends are expected to consist of excess inclusion income.

What information did Two Harbors Investment Corp. provide regarding the tax treatment of common and preferred distributions?

Two Harbors Investment Corp. provided detailed information on the tax treatment of common and preferred distributions for 2023 and 2024.

What is the federal income tax classification of Two Harbors’ 2023 common and preferred stock distributions?

The federal income tax classification of Two Harbors’ 2023 common and preferred stock distributions is provided in the 2023 Form 1099-DIV.

Where can stockholders find additional information regarding Two Harbors Investment Corp.?

Stockholders and other interested persons may find additional information regarding the company at www.twoharborsinvestment.com, at the Securities and Exchange Commission’s Internet site at www.sec.gov or by directing requests to Two Harbors Investment Corp.

Does Two Harbors Investment Corp. provide tax, accounting, or legal advice?

Two Harbors Investment Corp. does not provide tax, accounting, or legal advice. Stockholders are urged to consult their tax advisor regarding the U.S. federal, state, local, and foreign income and other tax consequences.

What is the head of investor relations' contact information for Two Harbors Investment Corp.?

Margaret Karr, Head of Investor Relations, Two Harbors Investment Corp., can be reached at (612) 453-4080 or Margaret.Karr@twoharborsinvestment.com.